The Union Budget 2025 lays out a structured roadmap for economic growth, aligning short-term fiscal priorities with the long-term vision of 'Developed India' by 2047. With a focus on development measures and four key engines — agriculture, micro, small and medium enterprises, investment and exports.
The Union Budget 2025 lays out a structured roadmap for economic growth, aligning short-term fiscal priorities with the long-term vision of 'Developed India' by 2047. With a focus on development measures and four key engines — agriculture, micro, small and medium enterprises, investment and exports.
During the budget speech, the finance minister reaffirmed the government's commitment to fiscal consolidation. The fiscal-deficit target for the next financial year is set at 4.4% of the gross domestic product, down from 4.8% in the current fiscal. This gradual reduction in India's fiscal deficit is expected to boost foreign investor confidence and send a positive signal to global rating agencies. More importantly, from a macroeconomic perspective, it should help stabilise the exchange rate and contain food inflation.
The budget proposes several regulatory and direct tax measures aimed at enhancing tax certainty, promoting ease of business and compliance, and providing significant relief to the taxpayers.
Income Tax Bill
A major announcement in this year's budget is the introduction of the Income Tax Bill in the coming week. The bill is expected to simplify tax provisions, reduce complexities and improve the ease of doing business in India. It Is expected that the bill would have considered the suggestions and recommendations received from the public at large.
Personal Taxation – Significant Relief
The Union Budget has proposed to provide substantial tax relief on the personal tax front. The proposed reduction in personal tax rates marks a decisive shift, boosting disposable income and stimulating consumption-driven economic growth. Owing to these proposals, the old tax regime is now less likely to retain its attractiveness.
Rationalisation Of TDS/TCS Provisions
The budget addresses long-standing industry demands by rationalising TDS thresholds, though the rationalising in the TDS rates could be expected in the upcoming simplified bill. The budget also proposes removal of higher TDS/TCS rates for non-filers of return of income with a view to reduce the compliance burden in terms of verification related challenges.
The TCS on liberalised remittance scheme for education purposes, including cases where the amount being remitted is out of a loan obtained from prescribed financial institutions, is proposed to be removed, whereas the threshold for other remittances under the LRS or for overseas tour programme package is proposed to be increased from Rs 7 lakh to Rs 10 lakh. Additionally, TCS on sale of goods is proposed to be removed, as the TDS is otherwise applicable subject to specified conditions.
Indirect Tax Proposals
The budget proposals aim to rationalise the customs tariff structure with an objective to boost domestic manufacturing and promote exports. Moreover, for ease of doing business, a time-limit of two years (which is extendable by one year) has been proposed for finalisation of the provisional assessment in case of custom duty.
Key Regulatory Reforms
The foreign investment limit in the insurance sector is proposed to be raised from 74% to 100%, subject to certain conditions. Moreover, requirements and procedures for speedy approval of company mergers are proposed to be rationalised. These are notable additions to the list of positive regulatory reforms being introduced round the year.
Further, while the Financial Stability and Development Council has been consistently reviewing various regulations, with a view to further strengthen trust-based economic governance and take
Transformational measures to enhance ease of doing business, a high-level committee for regulatory reforms is proposed to be set up for a review of all non-financial sector regulations, certifications, licences and permissions.
Other Key Tax Measures
Other key measures include incentivising the manufacturing sector in India by introducing a presumptive taxation regime and safe harbour for non-residents who provide services or store components for supply to a resident company that is establishing or operating an electronics manufacturing facility, incentivising investment in infrastructure space by providing an extension of the investment date for Sovereign and Pension Funds (up to 31 March 2030), extending various relaxations and incentives to bolster the International Financial Services Centre as a global financial hub and rationalisation of transfer pricing provisions for reducing disputes.
The budget marks a significant step toward a simpler, more taxpayer-friendly regime, with a clear emphasis on fostering a conducive environment for businesses and serves as a precursor to the broader tax reforms expected under the Bill.
The government's approach of 'trust first, scrutinise later' is a welcome commitment, expected to build investor confidence and further India's position as a global economic powerhouse. These changes, coupled with the government's consultative approach, reflect a positive and progressive outlook for the fiscal future.
Pranav Sayta, partner and national leader, international tax, EY India. Bhargav N Selarka, tax partner, EY India
Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.
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